Study And Analysis On Hedge Funds Finance Essay - Free Essay Example

Sample details Pages: 5 Words: 1480 Downloads: 3 Date added: 2017/06/26 Category Finance Essay Type Analytical essay Did you like this example? Hedge funds can be distinguished from mutual funds by a number of key characteristic. Different financial instruments are used by hedge funds to reduce risk, increase returns and minimize the correlation with equity and bond markets. Compare to mutual funds, hedge funds normally have more flexible investment strategies and are more flexible in their investment options, such as using short selling and derivatives which include puts, calls and options etc, and can also decide to have a higher level of leverage. Many hedge funds can deliver returns which are not correlated to any market and aim to have absolute or positive targets that are not correlated to the development of the market while mutual funds aim to have relative return in the results of the fund compared with an index. The structure of fee in hedge funds and that in mutual funds are also different. Hedge fund managers usually invest their own money in their fund. Mutual funds only have a management f ee which is a few per cent of managed capital while hedge funds normally have a fixed fee which is around two per cent of the managed capital and a variable fee which is around 20 per cent of any earnings lower and higher than the return target. When a variable fee is charged only if the value of funds is larger than its previous top value, some hedge funds would set a limit for when the variable fee may be levied. Most hedge funds are primarily intended to be managed by investment professionals who are experienced or financially strong individuals. One of the key characteristics of hedge funds is that it only allows investors to withdraw their money from the fund on a monthly or quarterly basis while mutual funds can provide liquidity on a daily basis. This can improve investments when there are less liquid assets. There are around 14 unique investment strategies of hedge fund and there are differences between them because all hedge funds are not the same. Many hedge funds prote ct their investments against losses and downturns in markets, but this does not apply to all of them. For example, some hedge fund strategies which are not related to equity markets can transfer similar returns with a very low risk of loss, while others may be as or more volatile than mutual funds. And the hedge fund strategies are also including selling short, using arbitrage, trading options or derivatives, investing in anticipation of a specific event and investing in deeply discounted securities etc. For example, short selling strategy means selling shares but not holding them and expecting to buy them back at a lower price in the future. Among the various hedge fund strategies, there are huge differences in investment returns, volatility, and risk. Reducing volatility and risk are the targets of most hedge funds when they are trying to keep capital and transfer absolute or positive returns under all market conditions. Strà ¶mqvist (2008) and ECB (2007) show that the hedge f und market has developed dramatically between 1996 and 2007. Around 2000 Hedge funds managed about USD 135 billion dollars in 1996 and the figures were increased to 10000 and USD 2000 billion in the end of 2007 (see Figure 1). In this period, not only hedge funds have grown in size, but also numbers of strategies used has changed. Hedge funds can affect financial markets positively or negatively and perform two functions on the financial markets. Firstly, liquidity in the financial market can be improved by hedge funds. When there is a higher liquidity in the financial market, pricing should be more effective. Compare to other investors, hedge funds would like to buy or sell more assets and they can invest in markets and instruments with less liquidity while mutual funds cannot. Moreover, hedge funds usually play an important role in new markets. Liquidity in the financial market can therefore be increased. Secondly, hedge fund can use arbitrage strategy to let managers achieve i n mispricing. Investors should purchase undervalued assets and then sell overvalued assets out, so that prices can be balanced and also can be shifted closely to fundamental values. As a result, the market can be more effective by improving pricing. However, there are also some negative effects occurred by hedge funds on financial market. It may occur higher risks due to the flexibility. For example, a higher level of leverage can produce larger profits, but risks can also be increased. If a wrong investment is applied, hedge fund will collapse. And also, the use of borrowing and of derivatives can have effects on financial market. There are several events happened in financial markets in the period 2007-2009. The financial crisis of 2007-2009 is caused by a liquidity shortfall in the United States banking system and it has resulted in the collapse of large financial institutions, the bail out of banks by national governments and downturns in stock markets around the world. Fo r examples, Bear Sterns hedge funds collapsed in the beginning of 2007 and these funds had highly leveraged portfolios with credit instruments related to the US market for housing bonds; Lehman Brothers Holdings Inc which was a global financial-services firm declared bankruptcy in 2008; the Icelandic banking sector collapsed and hedge funds are accused of speculating against the currency and the economy in Iceland (Affà ¤rsvà ¤rlden, 31 March 2008) etc. The financial crisis 2007-2009 has affected hedge funds more than they have affected the crisis while there are still lack of evidences to show that the crisis is caused by hedge funds . Hedge funds had poorer returns due to the financial crisis. According to the changes in regulations to manage the financial market in 2008, hedge funds have been affected. The changes in regulations are about to prevent short selling which affected different hedge fund strategies. Short selling is one of the major strategies of hedge funds. When it was prevented in the falling market, hedge funds would not be able to sell shares and to buy them back at a lower price in the future. And also, it would be much harder to protect long positions through short positions and to use certain arbitrage strategies. Hedge funds then applied a short bias strategy to create back a higher positive return. In the financial crisis 2007-2009, future movements in values of assets cannot be foreseen easily because the volatility in shares and prices was very high. While the share prices increased and the commodity prices decreased suddenly, many hedge funds were experiencing problems. And also, the problems of banks have affected hedge funds which are in the form of more restrictive lending, higher borrowing costs and assets related to bankruptcies such as Lehman Brothers. The hedge funds were forced to sell assets in a falling market and this affected their returns negatively. Moreover, the financial crisis 2007-2009 has also affected v arious types of assets. Hedge funds normally assume different types of risks including credit, duration and liquidity by receiving premiums which usually produce majority of the profits of hedge funds. In the crisis, the higher degree of risk taking did not lead to higher profits because different types of assets has been affected by the downturn and at the same time all the profits that gained from the premiums has been cancelled by the market. The losses made in the crisis could not be covered by the increased risk premiums. Sometimes, hedge funds may also have both positive and negative effects on the financial crisis. There are many benefits of Hedge funds. For examples, many hedge fund strategies can generate positive or absolute returns in both rising and falling equity and bond markets; in a balanced portfolio, hedge funds comprehension can lower overall risk and volatility of the portfolio and also increases returns; there are huge amount of hedge fund investment styles a nd many of them are nor correlated to each other, therefore, investors would have a wide range of hedge fund choices in order to meet their different investment purposes; it is proved by some researches that hedge funds usually have higher returns and lower risk comparing to other investment funds and also hedge funds create more stable long-term investment returns than any of the individual funds etc. There are also critiscisms of Hedge funds including Transparency, Systemic risk, Market capacity, U.S. investigations, Performance measurement and Value in mean/variance efficient portfolios etc. In conclusion, hedge funds had both positive and negative effects on financial markets but had been affected by the events in financial markets in the period 2007-2009. For examples, most types of asset and markets has been affected by the downturn and it has reduced the diversifications effect; hedge funds had been affected by the changes of regulation and hedge funds which are in the for m of more restrictive lending, higher borrowing costs and assets related to bankruptcies such as Lehman Brothers have been affected by the problems of banks etc. Therefore, the performance of hedge funds became worse. Don’t waste time! Our writers will create an original "Study And Analysis On Hedge Funds Finance Essay" essay for you Create order

Australian Foreign Policy And Australia s Relations With...

Australian foreign policy is characterised by a series of significant issues that are all inter-related. This piece will focus on Australia’s relationship with the US, Asylum Seeker policy and Australia’s relations with Asia. Relationship with the US Australia has had a long and close relationship with the United States. US-Australian relations are underpinned by the ANZUS treaty, finalised in 1951. The relationship is underpinned by shared values, culture, social bonds and common strategic interests. However, the partnership has become a problem within Australian foreign policy for a variety of reasons. Firstly, there is concern regarding the responsibilities we have placed upon ourselves as an Ally. Although we are not obligated to join the US in war, we are consistently following them into overseas conflicts that we otherwise have no interest in. 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Supporting Legalization Marihuana Presented-Myassignmenthelp.Com

Question: Discuss About The Supporting Legalization Marihuana Presented? Answer: Introduction Recently, Canada announced its plan of legalizing the recreational use of marihuana by the end of July 2015 and proved that it is a cool next door neighbour of United States. The legalization of the recreational use of marihuana was fulfilment of one of the campaign promises of the present Prime Minister of Canada, Justin Trudeau. Marihuana had been legal in the nation since 2001; though, this is a move for an industrialization large nation moving towards legalizing a controversial drug (Molly, 2017). In the following parts, the reasons for supporting legalization of marihuana have been presented. Legalization of Marihuana Just because Canada has decided to legalize marihuana, it is not a good enough reason for it to be right. And so, there is a need to highlight compelling cases for legalizing recreational use of marihuana. The first point in favour of this is the medicinal properties of marihuana, which are well known (Welsh Loria, 2014). In this regard, a crucial point which needs to be highlighted is that the view of legalizing marihuana is not just of Canada. 57% of the adults of United States, as per a 2016 Pew Research study, believe that marihuana needs to be made legal in the nation and only 37% believed that it should continue to be illegal (Geiger, 2016). So, not only the people of Canada support the legalization of marihuana, but also of the neighbouring nation, i.e., US. Another substantial point which is to be taken into consideration for legalizing pot is that it is not a gateway drug, as is the conception of the opponents of its legalization (Szalavitz, 2015). Even though the people are like to use other drugs instead of opting for marihuana smoking, there is nothing to show that the reason for this is pot. A major problem is continuing to not give marihuana a legal status is that the enforcement of the marihuana related contraventions continue to be an expensive affair and the resources which are used to punish these contraventions, can instead be put to use somewhere else. As per the Human Rights Watch and the ACLU (American Civil Liberties Union) 2016 report, around six million people were arrested in US alone for possessing marihuana (Williams, 2016). Added in this is the cost of keeping the individuals behind bars and the money and resources of the court used on such individual, which results in a big mess (Luis, 2016). One can also not deny the fact that legalization of marihuana would result in addition of billions of dollars to the economy of any nation, in a very quick manner. As per the article published by CNBC back in 2010, the earnings from legalization of pot would be vaguely around $10 billion to $120 billion for every year (Nelson, 2010). This infusion of money would boom any economy. Apart from this, a lot of money can be made from tax revenues, where tax is imposed after marihuana is legalized. This would provide government with additional cash, which can be used by it in different programs. Nearly $70 million were generated from July 2014 to June 2015 by Colorado, solely from the taxes imposed after marihuana was legalized (Sweet, 2015). Following that year, the amount which was brought in as taxes stood approximately at $200 million (Williams, 2017). A key worry which is made by the opponents of legalization of marihuana is that it results in increased crime. However, the test cases in Washington and Colorado show otherwise. Even though there was a minimalistic rise in crime in the past few years in Denver, there was nothing to show that this was due to the legalization of marihuana, as the crimes related to marihuana composed of less than one percent of all the other offences committed (Ingold, 2016). There is also no denying to the fact that there are a number of other things which are legal and which result in deaths of people, in comparison to which, marihuana does not seem dangerous. Use of alcohol beyond limits causes around 88,000 deaths every year (CDC, 2016). The overdose of prescription drugs results in 25,000 deaths every year (CDC, 2017). Cigarettes kill over 480,000 individuals on annual basis (National Institute of Abuse, 2017). There is still a case to be reported where a person died from overdosing on marihuana (D rug Enforcement Administration, 2017). Furthermore, the indirect effects of marihuana can also be avoided by taking proper care (Couch, 2015). In comparison to the other drugs like alcohol, opioids, cigarettes and even caffeine, marihuana is not that addictive (Molly, 2017). Even though there have been cases where the people have stated that they became addicted to marihuana, but 91% of the cases are such, who did not become addicted after using marihuana (Arkowitz Lilienfeld, 2012). A significant benefit which would be attained from the legalization of marihuana is that the power would be taken from the hands of the violent drug cartels, along with reducing unlawful crossings on border, thus, effectively resulting in countless lives being saved, particularly in context of the pitiful situation present at the border of US and Mexico (Molloy, 2015). Even though this discussion favours legalization of marihuana, the need for taking care cannot be denied, particularly because cannabis is linked to some particular mental illnesses. This is because the relationship with marihuana is linked to anxiety and depression, even though a casual relationship between the two has not been established scientifically. Further, there is evidence to show that the teens who regularly smoke pot have to face long-lasting damage to their immature brain. And the impact of smoking anything on lungs is also an area of concern (Grant, 2017). Then again, this is also true for the already legalized items like cigarettes. However, every aspect has certain negated points, because of which, the particular aspect cannot be denied credibility. For instance, caffeine addition is also an issue of concern, but that does not mean that it needs to be made unlawful. And so, legalization of marihuana in a careful manner is the need, to counter its negated impact. Conclusion Thus, it can be effectively concluded that marihuana should be legalized in not only Canada, but also in other nations. There is not one, but several reasons for doing so, which includes the increased revenues, which would boost the economy and the increased taxes, which can be used by the government for different purposes. Along with this, the medicinal use of marihuana cannot be denied. Thus, legalization of marihuana is a right step. References Arkowitz, H., Lilienfeld, S.O. (2012). Experts Tell the Truth about Pot. Retrieved from: https://www.scientificamerican.com/article/the-truth-about-pot/ CDC. (2016). Fact Sheets - Alcohol Use and Your Health. Retrieved from: https://www.cdc.gov/alcohol/fact-sheets/alcohol-use.htm CDC. (2017). Fast Facts. Retrieved from: https://www.cdc.gov/tobacco/data_statistics/fact_sheets/fast_facts/ Couch, R. (2015). A study found the unintended way legalized marijuana is likely preventing overdose deaths. Retrieved from: https://www.upworthy.com/a-new-study-found-the-unintended-way-legalized-marijuana-is-preventing-overdose-deaths-rc2-3f Drug Enforcement Administration. (2017). Drug Fact Sheet. Retrieved from: https://www.dea.gov/druginfo/drug_data_sheets/Marijuana.pdf Geiger, A. (2016). Support for marijuana legalization continues to rise. Retrieved from: https://www.pewresearch.org/fact-tank/2016/10/12/support-for-marijuana-legalization-continues-to-rise/ Grant, K. (2017). What Canadas doctors are concerned about with marijuana legalization. Retrieved from: https://beta.theglobeandmail.com/news/national/what-canadas-doctors-are-concerned-about-ahead-of-marijuana-legalization/article34694165/?ref=https://www.theglobeandmail.com Ingold, J. (2016). Marijuana legalization unlikely to blame for Denver crime increase. Retrieved from: https://www.denverpost.com/2016/02/17/marijuana-legalization-unlikely-to-blame-for-denver-crime-increase/ Luis, N.S. (2016). The DEA just wrote a letter to Congress about marijuana. It's a big deal. Retrieved from: https://www.upworthy.com/the-dea-just-wrote-a-letter-to-congress-about-marijuana-its-a-big-deal Molloy, P. (2015). The Mexican Supreme Court's marijuana ruling could save lives on both sides of the border. Retrieved from: https://www.upworthy.com/the-mexican-supreme-courts-marijuana-ruling-could-save-lives-on-both-sides-of-the-border Molly, P. (2017). Canada is legalizing marijuana. Here are 9 reasons the U.S. should too. Retrieved from: https://www.upworthy.com/canada-is-legalizing-marijuana-here-are-9-reasons-the-us-should-too National Institute of Abuse. (2017). Overdose Death Rates. Retrieved from: https://www.drugabuse.gov/related-topics/trends-statistics/overdose-death-rates Nelson, A. (2010). How Big Is The Marijuana Market?. Retrieved from: https://www.cnbc.com/id/36179677 Sweet, A. (2015). Marijuana brings more tax dollars than alcohol. Retrieved from: https://www.csbj.com/2015/09/15/marijuana-brings-more-tax-dollars-than-alcohol/ Szalavitz, M. (2015). Once and for All, Marijuana Is Not a Gateway Drug. Retrieved from: https://www.vice.com/en_us/article/9bgn7a/why-marijuana-is-not-a-gateway-drug-1013 Welsh, J., Loria, K. (2014). 23 Medical Uses of Marijuana. Retrieved from: https://www.businessinsider.in/23-Medical-Uses-Of-Marijuana/articleshow/34015633.cms Williams, T. (2016). Marijuana Arrests Outnumber Those for Violent Crimes, Study Finds. Retrieved from: https://www.nytimes.com/2016/10/13/us/marijuana-arrests.html?_r=0 Williams, T. (2017). Marijuana tax revenue hit $200 million in Colorado as sales pass $1 billion. Retrieved from: https://www.marketwatch.com/story/marijuana-tax-revenue-hit-200-million-in-colorado-as-sales-pass-1-billion-2017-02-10

Who Was More to Blame for the Cold War, the Usa or the Ussr Essay Example

Who Was More to Blame for the Cold War, the Usa or the Ussr? Paper Who was more to blame for the cold war, the USA or the USSR? This Cold War has affected the world from 1945 until now. The blame lies on one of these two countries. I believe it is these party’s leaders who should be blamed for the cold war, not the countries. At the time, these two countries were on very precarious political and military terms, which were ready to fluctuate at any moment. These two countries had lead Europe to a standstill. The two, were in a dangerous state of political tension. So much so that they had stopped short of armed warfare. The two countries had led themselves into a Cold War. This is due to the fact that both of these superpowers were in the possession of nuclear weapons. The USA and the USSR are the two main culprits. Britain is not classified as a culprit, as in 1949 the British could no longer sustain the costs that this war against communism required. The USA and the Soviet Union were the main superpowers as they could sustain themselves and both countries were in possession of very dangerous and destructive nuclear weapons. I believe we should question which of the country’s leader’s caused Europe to find its self in this state. We will write a custom essay sample on Who Was More to Blame for the Cold War, the Usa or the Ussr? specifically for you for only $16.38 $13.9/page Order now We will write a custom essay sample on Who Was More to Blame for the Cold War, the Usa or the Ussr? specifically for you FOR ONLY $16.38 $13.9/page Hire Writer We will write a custom essay sample on Who Was More to Blame for the Cold War, the Usa or the Ussr? specifically for you FOR ONLY $16.38 $13.9/page Hire Writer I believe Stalin and his Red Army are to blame. This is so as Europe had recently recuperated from the Second World War. Through Stalin’s rash and reckless actions he reacted exactly as Hitler had done. Stalin had used the timorous excuse of a buffer zone to expand his empire. Originally, Stalin was to obtain his clutches on the east of Germany –as agreed at the Yalta and Potsdam conferences- later on however, Stalin occupied the Baltic States, Bulgaria, Romania and Hungary without concession. This showed the capitalists just how untrustworthy this leader was. Not only did Stalin occupy these countries, he dictated their government and politics, whilst indoctrinating communism into their societies. By expanding his empire in such an illicit manner, Stalin arose a great deal of suspicion. Truman was especially cynical about Stalin’s intentions, as he believed Stalin’s ambition was to expand his empire and therefore acquire enough power to conquer the USA. There was reasoning behind Truman’s suspicions. The Soviets had proved how ruthless they were after having made an allegiance with the capitalists. The allies were untrusting towards the Soviets, as they had formerly signed a non-aggression contract with Hitler. This simply proved that Stalin would unite with the most powerful body in order to profit from it. This caused further conjecture with the USA and therefore worsened their relations helping to cause the Cold War. Communism in itself caused the allies to become uneasy. This is due to the combination of the vivid memory of the Second World War and the acquired financial and nuclear power of the Soviets. This and the opposing ideologies caused the Americans to relive World War Two. These ideologies had been present for a substantial amount of time but the factors above caused the already weak ‘relationship’ to crumble further. Stalin’s fierce expansionism caused the USA to react. Truman decided that he had to address this uprising problem. This caused the Truman Doctrine to be introduced to the American Congress. This form of aid –which was detested by Stalin- was forced upon by himself. This caused the liaison to suffer a great strain on their relationship. The Soviets suffered great losses as a result of this as the Red army were losing allies. The USA did this by giving economic aid to the countries that needed it. This gained their support thus angering Stalin, as a result of this he formed the ‘comecon’. This type of financial aid did not work as the Soviets were lacking funds and hence were not able to assist each other financially. The Soviets decided to verify USA’s economic state by forming what is known as the Berlin Blockade. This cut off the American’s trade links and transport system slowing the economy enormously. This move was seen as a form of militarism by the USA. This war had become active. Stalin was actively thwarting the American economy and yet Truman did not begin a war. He avoided this by flying ‘Candy planes’ over West Berlin. These planes dropped supplies every three minutes. This continued for eleven months. Stalin was trying to snap the American forbearance of the several military moves. Truman did not react in an aggressive manner causing Stalin to lift the Blockade. After doing this Stalin felt the need to strengthen his alliances with his communist countries thus causing him to form the Warsaw pact. The Americans were not free of the blame for the start of this war. They too had contributed to the severe breakdown of the relationship. President Roosevelt died on the twelfth of April in 1945. This changed things drastically as his successor was not only a fierce capitalist, but also a storming anti-communist. Harry S. Truman was untrusting of Stalin from the beginning. Some could argue that Truman was narrow-minded and he should have accepted Stalin without judgement at first. However, I believe that it was Stalin that caused these suspicions to arise in the first place. Truman not trust Stalin, he actively provoked a reaction out of Stalin when testing the atomic bomb, however it could also be said that the test was simply a defence mechanism used to scare Stalin and remind him of the former agreement. The Americans reaction to the ‘comecon’ pact was to form a greater alliance. Bizonia, this consisted of Britain and America joining their sector of Germany to form a stronger bond. This was soon made Trizonia when France joined. Not only had a huge alliance been made, this alliance had introduced a new currency. Stating they were a country. It could be said that this provoked Stalin into the Berlin Blockade, but we must question the extremity of the reaction. Blocking a sector of employment and economy. Is this not too extreme? All things considered, it was Stalin who caused this Cold war. We must look at Stalin when pointing the finger of blame, not America, not Truman, not even the Soviet Union but Stalin. Stalin’s extreme expansionism caused the ongoing distrust between these two allies if Stalin had not been so imperialistic Truman would not have reacted like he did. It goes to show how much damage was done caused by Stalin when we are still witnessing ongoing pacts and allegiances which are attempting to improve the relationship between the USA and Russia. Although this relationship has improved greatly all it needs is for a harsh factor to make it unstable and at risk once more. All it needs is another Joseph Stalin.